2012 (5) TMI 33 - AT - Central Excise

Waiver of pre-deposit - Demand is confirmed after denying credit of service tax paid in respect of services availed by the applicant for setting up of storage tanks at the port - The applicant in reply to the contention raised by the Revenue such as per Rule 6(5) of the Cenvat Credit Rules, 2004 credit availed on the service tax paid in respect of Consulting Engineering Services, technology and software services and erection, commissioning and installation of services is admissible even these are used in or in relation to the manufacture of exempted final product - Held that the service tax paid on input services which are used in or in relation with setting up, modernization, renovation or repairs is admissible. The applicant is engaged in manufacture of excisable goods and the inputs were imported which are being stored at the port and subsequently transported to the factory for use with the manufacture of the final product - pre-deposit waived.

Summary

Issues:
1. Denial of credit of service tax paid in respect of services availed for setting up storage tanks at the port.
2. Admissibility of Cenvat credit of service tax paid on input services received outside the factory premises.
3. Interpretation of the definition of 'input service' under the Cenvat Credit Rules, 2004.

Analysis:
1. The applicant filed for waiver of pre-deposit of duty, interest, and penalty amounting to Rs.2,78,88,383/-, as the demand was confirmed by denying credit of service tax paid for services used in setting up storage tanks. The adjudicating authority held that services for the construction of an immovable storage tank outside the factory premises do not qualify as input services under the Cenvat Credit Rules.

2. The applicant argued that as per the definition of 'input service,' credit of service tax paid on services related to setting up, modernization, renovation, or repairs of a factory should be allowed, regardless of the location of utilization. They relied on a previous Tribunal order where credit was permitted for services availed outside the factory premises. The Revenue contended that since the storage tanks were outside the factory premises and considered immovable property, the credit was inadmissible.

3. The Tribunal analyzed the definition of 'input service' under the Cenvat Credit Rules, 2004, which includes services used in or in relation to setting up, modernization, renovation, or repairs of a factory, among others. It was noted that the applicant imported inputs stored at the port before transporting them to the factory for manufacturing final products. The Tribunal found that credit cannot be denied for service tax paid on taxable services received outside the factory premises if they fall under the definition of 'input service.' Consequently, the Tribunal allowed the stay petition, waived the pre-deposit, and stayed the recovery during the appeal's pendency.

4. Given the significant amount of credit involved, the appeal was scheduled for regular hearing on a specified date. The judgment highlighted the importance of interpreting the Cenvat Credit Rules in line with the definition of 'input service' to determine the admissibility of credits for services utilized in various manufacturing processes, even if conducted outside the factory premises.